IRS Letter and $10,000 Penalty for Late 5471

Question

Hi

I’ve been left out to dry by my former US tax accountant and I’m in desperate need of help. Last year I had a fellow in Langford file 3 years of US taxes for me. He told me that I would only need to file the last 3 years in order to catch up as a US citizen living in Canada. Everything was signed and filed and I didn’t hear back from the IRS until recently.

I received a letter stating that form 5471 was filed late and that I now owe a $10,000 penalty to be paid ASAP or the IRS will seize my assets. I tried to get in touch with my former accountant but he’s not returning my calls or emails.

Have you seen a penalty like this before? To be honest I don’t even know what that form was filed for.

Can I setup a consultation for you to review my situation?

XXXXXX

Answer

Hi XXXXX

Very sorry to hear about your tax problems and penalty assessment. I can imagine how frustrating this must be. You received this IRS notice because form 5471 was filed late. Form 5471 is required to be filed if you have ownership in any private foreign corporation (likely a Canadian corporation). The penalty for not filing this form is $10,000. Since 3 years of tax returns were filed I’m not sure why you’ve only receive one penalty notice. It’s possible other notices will be arriving soon.

It’s also odd that he didn’t file your tax returns under one of the IRS amnesty programs intended to avoid penalties. Regardless, we’ll have to plan for a fix going forward.

Considering this is your first offense it’s likely the IRS will waive the penalty if we can show some reasonable cause why they were filed late. We have some experience in dealing with the IRS on penalty matters.

Please give me a call at 250-381-2400 and we can discuss your options further.

The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

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